by Paul J. Bruder, Jr.
The Underground Storage Tank Indemnification Fund ("USTIF" or the "Fund") was established within the Storage Tank and Spill Prevention Act (the "Tank Act"). The USTIF is a special fund in the state treasury which consists of fees assessed by the Underground Storage Tank Indemnification Board to owners and operators of underground storage tanks. The seven member USTIF Board consists of the Insurance Commissioner and the Secretary of the Department of Environmental Protection (DEP), and five other members appointed by the Governor.
The USTIF is funded entirely by fees paid by owners/operators of storage tanks, fuel distributors and tank installers, based on factors specific to each business and the gallons delivered, tank capacity and tank removals/installations performed. Monies in the Fund are appropriated for the purpose of making payments to owners/operators of USTs who incur corrective action liability or for bodily injury or property damage caused by a release from a UST. Payments to eligible claimants are limited to actual reasonable and necessary costs of corrective action and to the amount of an award of damages by a court for bodily injury or property damage. Payable claims do not include the cost of upgrading, routine inspections, investigations or permit activities not associated with a release.
The Fund has a $1,500,000 limit per tank per occurrence and a $1,500,000 annual aggregate limit for each owner of 100 or less USTs. There is a $3,000,000 annual aggregate limit for owners of 101 or more USTs. Owners must pay a deductible in an amount not less than $5,000 per tank per occurrence for each tank that contributed to the release. If the release also results in an eligible claim for bodily injury or property damage, the owner must pay an additional deductible per tank per occurrence in an amount not less than $5,000 (in addition to the corrective action deductible).
In order to receive a payment from the USTIF, the claimant: must be the owner/operator of the tank which is the subject of the claim; must be current with the fees; must have a registered UST; must have a permit, if required; must demonstrate that the release that is the subject of the claim occurred after February 1, 1994; comply with the notification requirements set forth in DEP's regulations at 25 Pa. Code 977.34 (relating to reporting claims to the USTIF within 60 days after confirmation of a release), and; cooperate with the USTIF in its eligibility determination process, claims investigation, the defense of any suit, the pursuit of a subrogation action, or other matters as requested. The USTIF Board and its third party administrator scrutinize each claim to ensure compliance with these requirements, and will deny any claim that does not strictly comply. We will analyze some of these requirements below.
Obviously, where a claimant has not properly registered the subject tank or paid the appropriate fees, then any claim will be summarily denied by the USTIF. In a transactional scenario, where a party purchases UST's from another party, often there may be some uncertainty as to the eligibility requirements and whether the seller is in compliance with the basic eligibility requirements regarding registration and fees. In such a case, the purchasing party should investigate these matters prior to settling on the deal, and if the deal goes through, if the seller of the tanks has not complied with the eligibility requirements, the new owner should immediately contact DEP to have the tanks registered and permitted, and pay all outstanding fees. However, coverage is not afforded where the fees are paid after the discovery of contamination. If the previous owner never registered the tanks and the new owner becomes aware of the presence of tanks on the property, then the new owner must immediately register the tanks in accordance with Section 501 Tank Act and the DEP regulations. It is unlawful for any owner or operator to operate or use, in any way, any UST that has not been registered as required by the Tank Act. The owner must submit a form to the DEP to register each UST. Problems are more likely to arise when the previous owner (or an owner before the previous owner) registered the tanks and then failed to pay the annual fees to the Fund. In that case, the new owner, although he is an innocent party, is likely to receive a notice of delinquency from the DEP. In the worst case, there may have been a release from the USTs and the previous owner failed to follow the reporting requirements under the Act, which means that the new owner will be charged with the remediation costs. However, under Section 1311 of the Tank Act, the previous owner is presumed liable for any contamination or pollution that occurred when he owned the tanks. The new owner may file a private cause of action against the previous owner to recover costs and fees expended as a result of the pollution. DEP may also assess additional criminal and civil penalties against the previous owner for failure to comply with the Act.
Notice and Confirmation of Release
To receive payment from the Fund, the participant must notify the Fund within 60 days after the confirmation of release. An investigation of an indication of a release must be done no later than 7 days after the indication using one of the investigative procedures listed in the DEP regulations. If the procedure(s) indicate a release, then the release has been confirmed. Even if the investigation at the site is somewhat limited, as long as at least one of the listed procedures is used, then a confirmation of the release has occurred.
The regulations require confirmation of the release to trigger the reporting requirement, so actual knowledge is required that a release has been confirmed. The confirmation of a release is determined by considering the totality of the circumstances. Factors to consider could include contaminated soil, a hole in the line amidst corrosion, a pump behaving erratically, the product was under pressure in the line in normal operation, the consistent treatment of the release as confirmed, and the line did not hold pressure after repair which indicated that other escape holes existed in the line. The odor emanating from the soil, the visible vapors rising from the soil, and photo ionization detector soil screening results also are enough factors to confirm a release. It is not necessary to know the extent of the contamination in order to know that a release has occurred.
Once a release is confirmed, the reporting requirement is a prerequisite for eligibility which must be satisfied unless the untimeliness is excused. A delay will only be excused in extraordinary circumstances, including fraud, the breakdown in the administrative process, or non-negligent circumstances related to the insured, counsel, or a third party. The burden of proof falls on the claimant to demonstrate entitlement to payment of the claim.
In a 2005 USTIF Case, Harrisburg Jet Center/USTIF, UT04-08-025, 16 (2005), the claimant was ineligible for USTIF coverage because confirmation of the release was confirmed in October 2003 when the visible contamination was noted, the hole in the line was observed, the pump was behaving erratically, and other factors occurred to signal the release. Once one or more procedures were taken as listed in 25 Pa. Code § 245.304(b), the release was confirmed and there was no need to wait for the test results from a soil and groundwater sample analysis to know that there was a release. The delay in waiting for the analysis was not excused and the 60 day required time period for notification had passed by the time the claimant notified the USTIF of a potential claim on January 14, 2004.
In a 2006 USTIF case, Ashton Road Automotive, Inc./USTIF, UT04-06-065, 13 (2006), the claimant was also ineligible for USTIF coverage because the confirmation of the release occurred on August 13, 2003 when the site was excavated and an odor emanated from the soil, vapors were seen rising from the soil, and the PID soil screening results showed a high level of contamination. Since the claimant was present at the site on that date and these observations constituted a confirmation of the release, it was not appropriate to start calculating the 60 day reporting requirement by the date on which the claimant received the result of laboratory tests of the soil samples.
Establishing that Release Occurred After February 1, 1994
In order to claim eligibility for payment under the USTIF, the claimant must also demonstrate that the release occurred after February 1, 1994. The heavy burden of proof is on the claimant to provide substantial evidence that "it is more likely than not" that the release occurred after February 1, 1994. If the evidence is inconclusive whether the release occurred before or after 1994, the claimant has not met its burden of demonstrating eligibility for reimbursement.
It would appear from Pennsylvania case law that it is not necessary to prove beyond a reasonable doubt that the release occurred prior to February 1, 1994, but only to demonstrate to the Board's satisfaction that the release occurred after that date. The Commonwealth Court of Pennsylvania has indicated that the claimant must show that it is "more likely than not" that the release occurred after February 1, 1994. Southeast Delco School District v. USTIF, 708 A.2d 881 (Pa. Cmwlth. Ct. 1998). The claimant must take affirmative action to demonstrate that the release occurred after 1994 and cannot simply attempt to rebut the evidence or methodologies of USTIF experts but must take his own steps to provide evidence that shows it is more likely that the leak occurred after February 1, 1994.
The USTIF has been very consistent over the years in the application of the eligibility requirements and seemingly very fair in its assessment of eligible claims. Strict adherence to the eligibility criterion is a must, and in conducting any commercial transaction involving potentially eligible storage tanks, these matters are best investigated during any due diligence period. Any uncertainties should be investigated by the buyer's counsel or consultant and a verification with DEP and the USTIF as to the status of the tanks. There are no second chances with these eligibility requirements.